Northern Ireland businesses face a £1.5 million bill because of a climate change levy from April 1.

It is a tax on business and public sector energy use which was introduced in 2001 as part of a range of measures designed to help the United Kingdom meet its commitment to reduce greenhouse gas emissions.

Northern Ireland has been exempted from the charge and will still pay only a proportion of the full amount.

CBI Northern Ireland regional director Nigel Smyth said the cost of labour is going up, adding: "It could have been worse. What is going to happen now is that costs will go up by £1-1.5 million. It is a significant achievement to get this."

Mr Smyth said it was still cheaper and more efficient to use gas.

Enterprise and Investment Minister Arlene Foster has been working closely with Revenue and Customs and the Treasury in efforts to reduce the potential Climate Change Levy (CCL) burden on local companies from April 1.

Ms Foster said: "I welcome that as a result of discussions with Treasury it has been agreed that Northern Ireland companies will pay a reduced rate of CCL from 1 April 2011 up to 31 October 2013.

"The lower rate represents a 65% reduction on the full rate of CCL on gas supplies and should come as a very significant reduction on potential energy costs for business and public sector customers at this difficult economic time."